LNG

Santos, the Australia LNG export plant operator, and its joint venture partner, Beach Energy, said they had committed to proceed with work on their Cooper Basin assets to boost natural gas supply to the domestic market.

Santos said that the programme of works, which includes bringing a fifth drilling rig into the basin and optimising well connections, aims to deliver an additional 15 terajoules of gas per day, the equivalent of 14.2 million cubic feet per day, by the end of the year.

The Cooper Basin spans the state borders of northeast South Australia and southwest Queensland and the Cooper and Eromanga Basins contain Australia’s largest onshore oil and gas field development.

Santos operates the Gladstone LNG export plant in Queensland and the Darwin plant in the Northern Territory and its strategically important domestic assets in the Cooper Basin are linked to key infrastructure at Moomba in northeast South Australia

Santos-operated infrastructure enables the processing and transportation of natural gas and ethane around the East Coast of Australia, supported by substantial underground storage facilities suitable for natural gas, ethane and carbon dioxide.

Australian ministers in the new Labor government, which has been mostly hostile to the hydrocarbon industry for many years at federal and state level, are scheduled to meet in the coming week to discuss the domestic fuel crisis.

Supply shortfalls

This follows the Australian Energy Market Operator clearing the way for the triggering of the Gas Supply Guarantee Mechanism for the first time since the measure was introduced in 2017 to secure domestic gas for power generators amid potential shortfalls in southern states.

Increased Southern Hemisphere winter demand for energy, unscheduled outages at coal-fired power stations and energy shortages have led to rising natural gas and electricity prices across Australia.

Santos Chief Executive Kevin Gallagher said his Adelaide-based company continued to support Australian industry through the delivery of competitively-priced domestic gas.

“Santos will invest more than US$300 million (A$430 million) in the Cooper Basin this year developing and supplying critical fuels such as natural gas for our customers,” explained the CEO.

“This investment will deliver more gas to the domestic market, which is desperately needed,” he added.

“Recent domestic gas supply and price pressures have been caused by a spike in gas-fired power generation to back up renewables and to replace the 30 percent or more of coal-fired power generation that has been offline or not operating since early May,” said Gallagher.

Gallagher stated that the incremental investment in the Cooper Basin builds on the Santos “commitment” to meeting the fuel needs of customers.

Australian company Beach Energy and Mitsui and Co. of Japan have taken a positive final investment decision for stage-two development of the Waitsia onshore natural gas field that will contribute to equity LNG production in Western Australia by 2023.

Beach and Mitsui each own 50 percent of the venture and the operator of the Waitsia field in the onshore Perth Basin is Mitsui subsidiary, Mitsui Exploration and Production (Australia).

Beach and Mitsui said they had finalized and signed key commercial agreements with the North West Shelf LNG plant shareholders, the State of Western Australia and the pipeline and project company, Australian Gas Infrastructure Group (AGIG).

The Beach-Mitsui venture and Woodside Petroleum subsidiary, Woodside Burrup Pty Ltd, with gas from the Pluto gas fields, become the inaugural third parties to sign binding commercial access agreements with the North West Shelf LNG partners.

The six NWS LNG partners are Australia’s Woodside and BHP, UK major BP, Chevron Corp., Royal Dutch Shell and a Japanese partnership comprising Mitsubishi Corp. and Waitsia gas shareholder Mitsui.

“First equity LNG sales from Waitsia Stage 2 are expected to commence in in the second half of 2023,” said a statement from Beach.

“The Gas Processing Agreement and related agreements signed with the NWS LNG will enable up to 1.5 million tonnes of LNG per annum - 0.75MTPA of LNG to Beach) of Waitsia gas to be tolled and processed into LNG through the NWS facilities in Karratha between the second half of 2023 and the end of 2028,” stated Beach.

Beach and Mitsui will each market their respective LNG equity interest independently of the NWS LNG plant partners.

Beach Managing Director Matt Kay said the approval of the project delivers on a core element of Beach’s five-year growth strategy aimed at delivering annual production of more than 37 million barrels of oil equivalent by 2025.

“Waitsia is a world class, low cost, onshore gas resource and we are thrilled to be growing the Beach portfolio in Western Australia,” Kay explained.

“We believe the project offers material value to Beach’s shareholders and, through the agreement to export through the North West Shelf facilities, makes Beach an LNG player for the first time in the company’s 60-year history,” stated Kay.

“In addition to royalties, Waitsia will deliver approximately two hundred jobs for Western Australians through the development of our resources, construction of the new gas facility and its ongoing production,” he stated.

The Waitsia gas development involves the drilling of up to six wells, construction of a new gas processing facility, planned with preferred contractor Clough Ltd, and associated gas gathering infrastructure.

Total capital expenditure to first production is expected to be within the range of A$700M (US$530M) and A$800M, with funding to be supported from the company’s operating cash flows and facilities.

Delivery of gas to the NWS facilities will occur via the Dampier-Bunbury pipeline.

The pipeline connection to the Waitsia facilities is already in place, following its construction as part of the Waitsia Gas Project Stage 1 expansion, announced in July 2019.

The Waitsia partners have also entered into a DCA with the State of Western Australia, which includes the approval to export up to 7.5MT of LNG until the end of calendar year 2028.

That accord specifies domestic gas marketing obligation of 20 terajoules per day during the export period, which they are currently meeting through their existing gas sales from the Waitsia Gas Project Stage 1 facilities and the Xyris gas processing plant.

Other agreements signed by Beach and Mitsui include a Project Development Deed with the State of Western Australia, as well as accords with NWS LNG relating to gas processing, tie-ins, product allocation and cargo lifting and offtake.